This lesson continues our series on “risk” as we turn our gaze onto insurers. By this, we don’t just mean professional indemnity providers, but everyone involved in the insurance of law firms, such as brokers and law firm risk managers.

Our profession is a minefield of risk, and the frequency and severity of malpractice claims grow year-on-year. Insurers live at the very end of the process. They exist to clean up the mess when it goes wrong. As we shall see in this lesson, that gives them a very different perspective on risk from law firms and attorneys.

The insurer’s view of malpractice risk can be summarized in two words: Downside only. Insurers don’t get the shiny new clients, the hefty transaction fees or the eye-watering compensation packages which exist in the law firm world. These upsides are all reserved for the lawyers.

Also, insurers and law firms have a different field of vision around risk. Insurers have a broader view. They see the outcomes of an array of risks in the form of claims across markets. From there they can reverse-engineer the law firm’s work to identify the root cause. That’s great, it’s important and it’s always a learning point. But it’s too late.

The field of vision of the partner or associate is much narrower. From the outset, they can see the assignment and the fee-potential. But the associated risks aren’t always in their direct line of sight — indeed many of them are hidden. Different viewpoint, big disconnect.

This leaves insurers in an invidious position. They can identify risk, but they can’t mitigate it directly. Their next best option is to go to law firms with training on the most conspicuous risks. Most of us have had the training and can all recite the main risks: on-boarding, compliance, conflicts, money laundering, sanctions, unworthy clients and of course attorney mistakes. These days we can add tech and AI to that list, as we shall explore in the next lesson.

There is, however, a common root cause which runs through all of this. Risk-avoidance at law firms is largely focused on clear and present dangers. It doesn’t address hidden dangers, many of which share a common root cause — the routine execution of everyday tasks by attorneys. It’s not so much the work lawyers do, it’s how lawyers do the work.

As we often discuss in Lean Adviser, methods matter. At one end of the paradigm is the attorney, doing their best, at the service of the law firm and the clients.  At the other end is the insurer, hoping that the lawyer’s methods are safe. It’s hardly surprising then that insurers encourage their insured firms to equip the attorneys with the Lean Adviser tool set for the efficient, effective and safe practice of law.